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4 Solid Broadcasters to Pick for a Politically Charged 2020

Aniruddha Ganguly

Television broadcasters are expected to witness a blockbuster 2020 owing to the U.S. Presidential elections and summer Olympics. These are expected to aid 2020 U.S. TV ad spending (excluding digital), which is estimated to be $71 billion, up 1% from an estimated figure of $70.30 billion in 2019, per eMarketer.

Political ad spending, including direct candidate spending, Political Action Committee (PAC) spending and other issue advertising, is estimated to be $6 billion, per Kantar Media CMAG group, cited by Forbes.

Meanwhile, Cross Screen Media and Advertising Analytics estimates $6 billion in political ad spending, reflecting 57% growth from 2018. Growth in political ad spending on digital videos, primarily from Facebook FB and Alphabet’s GOOGL Google, is expected to almost double to $1.6 billion, compared with 2018.

Will Restrictions on Digital Platforms Aid Broadcasters?

Google has changed its policy of how political advertisers can target voters through the company’s services. Beginning January, Google’s political advertisers will only be able to target broader categories like gender, age and zip code, instead of detailed targeting, which involves voter records or political leanings.

Facebook, which refuses to not fact-check advertising published by politicians, has also tightened political rules by adding new disclosure requirements for political ads on its platforms, including Instagram.

Moreover, Twitter has issued a ban on political ads recently, followed by Spotify.

Political advertisers can be wary of these increasing restrictions, which can hurt their propensity to spend incrementally on digital platforms. This, in turn, can aid broadcasters in the 2020 elections.

Per Kantar Media, broadcast television is expected to fetch approximately $3.2 billion, followed by cable and digital ($1.2 billion each), and radio ($400 million). Including PACs and local races (non-federal), the estimate is expected to increase considerably.

Making the Right Choice

Here we pick four television broadcasters that are expected to outperform the market in 2020, with the help of the Zacks Stock Screener.

These stocks not only benefit from the above-mentioned, strong industry fundamentals but also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy), which makes them good investment options. You can see the complete list of today’s Zacks #1 Rank stocks here.

4 Key Picks

Atlanta, GA-based Gray Television GTN sports a Zacks Rank #1.

The company’s local stations are significantly popular among political ad buyers, which is a key catalyst. Notably, post the Raycom acquisition, Gray is reaching almost 25% of the U.S. population in 93 markets, operating more than 150 Big Four affiliated stations.

Gray now expects to set a new record for political revenues in 2020 by exceeding $235 million it had achieved in 2018.

The Zacks Consensus Estimate for 2020 earnings is expected to increase 184.2% year over year to $2.70 per share. The consensus mark for revenues is pegged at $2.32 billion, indicating 10.7% growth from the figure reported in the year-ago quarter.

 

Gray Television, Inc. Price and Consensus

Gray Television, Inc. Price and Consensus

Gray Television, Inc. price-consensus-chart | Gray Television, Inc. Quote

 

Irving, TX-based Nexstar Broadcasting Group NXST has a Zacks Rank #2.

The completion of the acquisition of Tribune Media in late September has expanded the company’s reach to 63% of the U.S. Television Households (69 million) through 197 stations in 115 markets. Nexstar has noticeable coverage in North Carolina, Pennsylvania, Iowa, Michigan and many other potentially hotly contested states. This is expected to benefit its political revenues.

Nexstar expects 2020 political revenues to grow double digit from 2016 and mid-single digit from 2018 on a same-station basis.

The Zacks Consensus Estimate for 2020 earnings is pegged at $18.04 per share, indicating a surge of 211.5% from the figure reported in the year-ago quarter. The consensus mark for revenues is pegged at $4.63 billion, implying 53.7% growth from the figure reported in the year-ago quarter.

 

Nexstar Media Group, Inc Price and Consensus

Nexstar Media Group, Inc Price and Consensus

Nexstar Media Group, Inc price-consensus-chart | Nexstar Media Group, Inc Quote

 

Another Zacks Rank #2 stock, New York-based Fox Corporation FOXA is expected to benefit from its expanded station group that is helping it cover a lot of local news.

Moreover, the acquisition of local television stations in Seattle and Milwaukee markets from Nexstar is a major political revenue driver.

The Zacks Consensus Estimate for fiscal 2020 earnings currently stands at $2.39 per share, up 5.3% in the past 30 days.

Moreover, the consensus mark for revenues is pegged at $12.25 billion, indicating 7.6% growth from the figure reported in the year-ago quarter.

 

Fox Corporation Price and Consensus

Fox Corporation Price and Consensus

Fox Corporation price-consensus-chart | Fox Corporation Quote

 

Bala Cynwyd, PA-based Entercom Communications ETM is expected to benefit from higher political ad spending on the radio.

This Zacks Rank #2 stock expects net political revenues for 2020 to increase more than $20 million on a year-over-year basis.

The Zacks Consensus Estimate for fiscal 2020 earnings currently stands at $2.39 per share, up 5.3% in the past 30 days.

Moreover, the consensus mark for revenues is pegged at $12.25 billion, indicating 7.6% growth from the figure reported in the year-ago quarter.
 

Entercom Communications Corporation Price and Consensus

Entercom Communications Corporation Price and Consensus

Entercom Communications Corporation price-consensus-chart | Entercom Communications Corporation Quote

 

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?

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Facebook, Inc. (FB) : Free Stock Analysis Report
 
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
 
Nexstar Media Group, Inc (NXST) : Free Stock Analysis Report
 
Entercom Communications Corporation (ETM) : Free Stock Analysis Report
 
Gray Television, Inc. (GTN) : Free Stock Analysis Report
 
Fox Corporation (FOXA) : Free Stock Analysis Report
 
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